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07.10.2020 / Budgeting « Back to all articles

6 Major Budgeting Mistakes to Avoid
2020 Budgeting Mistakes

Budgeting is an essential part of managing one’s money.  Without it, money is being spent with no plan for where it needs to go, and a crisis is inevitable.  Having a bad budget is better than having no budget at all, but there is no reason to choose between the two.  Here are a few common mistakes to avoid. 

 

Not Keeping Track 

Creating a budget is only the first step in using one.  Every dime might be accounted for on paper in a delicate balance, but if the actual expenditures are not compared with the budget itself, it may as well not be there.  Every purchase, every bill paid, every dollar needs to be accounted for in order to determine if the budget is being followed or not. 

 

Failing to Save Money 

Budgeting is not all about spending.  A budget exists to control what is spent, but also to free up money to be saved for later.  Spending all the money that is not assigned to a bill or expense is not a wise idea.  Some of it should be put into an emergency fund, some of it should be saved for retirement.  There are plenty of strategies on how to do it but failing to do it altogether is the worst of them all. 

 

Doing it By Yourself 

In a marriage or a family, when more than one person has access to the money, the budget cannot just be a one-person plan.  Everyone who has access to the funds must be included in the budgeting process.  Everyone needs to know what the limits are and what the plan is.  If one person is laying down the law, it can cause resentment, and it is almost certain that the plan will not be followed. 

 

Quitting Cold Turkey 

Budgets can reveal where most of the money is going, and that can be a frightening thing.  But when this happens, do not panic and cut out the bloated category entirely.  If it is that large of a piece of the budget, it is probably something that is enjoyable, and everyone is probably used to it.  Cutting out this category entirely would be a big change and can cause frustration and mean you’d be altering your lifestyle. In turn, this could lead to the end of the budget.  Instead, try to manage or restrict it rather than just cutting out the expenditure altogether. 

 

Making it Too Tight 

While there is some sense in accounting for every penny in a budget, if every penny has a specific job, it is almost guaranteed that the budget will fail.  There needs to be some room budgeted – room for eating out for example, or for parties.  If there is no cushion in the budget, unexpected expenses can wreck the financial picture. Expendable income should be included in the budget. 

 

Never Making Changes 

And finally, it is a mistake to never update the budget.  Seasons can change the amounts, interests can shift, and income can change.  Or maybe there is just a better way to do it.  A budget is not a taskmaster, but a tool.  If it is not working well, just make some changes until it does. 

09.28.2020 / Borrowing

Should You Refinance Your Home?
Mortgage rates have reached record lows. With the economy now coasting into a recession, it is only natural that you…

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07.10.2020 / Budgeting « Back to all articles

6 Major Budgeting Mistakes to Avoid
2020 Budgeting Mistakes

Budgeting is an essential part of managing one’s money.  Without it, money is being spent with no plan for where it needs to go, and a crisis is inevitable.  Having a bad budget is better than having no budget at all, but there is no reason to choose between the two.  Here are a few common mistakes to avoid. 

 

Not Keeping Track 

Creating a budget is only the first step in using one.  Every dime might be accounted for on paper in a delicate balance, but if the actual expenditures are not compared with the budget itself, it may as well not be there.  Every purchase, every bill paid, every dollar needs to be accounted for in order to determine if the budget is being followed or not. 

 

Failing to Save Money 

Budgeting is not all about spending.  A budget exists to control what is spent, but also to free up money to be saved for later.  Spending all the money that is not assigned to a bill or expense is not a wise idea.  Some of it should be put into an emergency fund, some of it should be saved for retirement.  There are plenty of strategies on how to do it but failing to do it altogether is the worst of them all. 

 

Doing it By Yourself 

In a marriage or a family, when more than one person has access to the money, the budget cannot just be a one-person plan.  Everyone who has access to the funds must be included in the budgeting process.  Everyone needs to know what the limits are and what the plan is.  If one person is laying down the law, it can cause resentment, and it is almost certain that the plan will not be followed. 

 

Quitting Cold Turkey 

Budgets can reveal where most of the money is going, and that can be a frightening thing.  But when this happens, do not panic and cut out the bloated category entirely.  If it is that large of a piece of the budget, it is probably something that is enjoyable, and everyone is probably used to it.  Cutting out this category entirely would be a big change and can cause frustration and mean you’d be altering your lifestyle. In turn, this could lead to the end of the budget.  Instead, try to manage or restrict it rather than just cutting out the expenditure altogether. 

 

Making it Too Tight 

While there is some sense in accounting for every penny in a budget, if every penny has a specific job, it is almost guaranteed that the budget will fail.  There needs to be some room budgeted – room for eating out for example, or for parties.  If there is no cushion in the budget, unexpected expenses can wreck the financial picture. Expendable income should be included in the budget. 

 

Never Making Changes 

And finally, it is a mistake to never update the budget.  Seasons can change the amounts, interests can shift, and income can change.  Or maybe there is just a better way to do it.  A budget is not a taskmaster, but a tool.  If it is not working well, just make some changes until it does. 

Need a
Loan?

Loans from $120 to $15,000. Get funded as soon as today!

09.28.2020 / Borrowing

Should You Refinance Your Home?
Mortgage rates have reached record lows. With the economy now coasting into a recession, it is only natural that you…